David vs Goliaths

THE public stockholders of Liberty Telecoms Holdings Inc. (LIB) are more likely to continue complaining against the offer to buy them out at P2.20 per share, which to them is low compared with their acquisition price.

On the other hand, stockbrokers willingly accepted the P2.20 price-per share offer because they are known more to speculate on listed shares and do not invest on them for the long haul. Who among them would buy a big block if they didn’t know anything going on inside the boardrooms?

The public can only cry foul over the new owners’ offer of P2.20 per share. Even regulatory authorities cannot intervene for them anymore.

Duediligencer can only sympathize with the public who had waited for LIB share price to recover in due time. More than P11-billion deficit was too much to bear for a company whose telecom assets had long been in “hibernation”.

The public investors in LIB shares might have been duped into speculating on the company’s telecom assets, a costly lesson that they should not forget.

Joint venture?
In the absence of proper and complete disclosures on what Globe Telecom and PLDT intend to do with their acquisition, the public have nothing to bet on.

What for are the telecom assets of Liberty Telecoms that they in effect bought from San Miguel Corp. by acquiring Vega Telecom Inc.?

To summarize: Globe Telecom and PLDT own Vega. Vega owns Liberty Telecoms. Liberty Telecoms ceded its telecom assets to Bell Telecommunication Phils. Inc., which used to be one of its subsidiaries.

Thus, Globe Telecom and PLDT indirectly own BelTel through their 50:50 percent ownership of Vega. Liberty Telecom may also participate in this three-way ownership as the owner of the telecom assets it transferred to BelTel. Said telecom assets were not ceded to BelTel for free. Definitely, Liberty Telecoms would place value on them via an independent appraisal.

The valuation is necessary when the time comes for the conversion of said telecom assets into equity in BelTel.

Share swap
The least PLDT and Globe Telecom could do and should do is to allow the public stockholders of Liberty Telecoms to participate in the ownership of BelTel’s telecom assets. Why not offer the public to swap their LIB shares with BelTel shares?. In this way, a low buyout offer of P2.20 per share would be out of the question. Instead, only the mode of share exchange would have to be considered.

Will the share swap be on one-to-one basis? The answer to this would depend on the valuation of LIB shares and BelTel’s shares, which, in turn, would determine the value of Liberty Telecoms’ telecom assets. This would be tantamount to a public exposure of what should have been hidden until the stock exchange would delist Liberty Telecoms.

Even the SEC would have agreed to a share swap because the public would not be deprived of their holdings. Besides, they would end up owning a piece of BelTel as Vega’s telecom unit.

Another possible option is for BelTel to become a joint venture of Liberty Telecoms and Vega. At this time, Liberty Telecoms has yet to decide on the conversion into equity of its telecom assets for lack of valuation.

Go to court?
Certainly, there would be no free transfer of ownership of assets from Liberty Telecoms to BelTel. Otherwise, the public stockholders of Liberty Telecoms would have a justifiable reason to seek the intervention of regulatory authorities. They could question the loss of the value of their holdings in Liberty Telecoms.

The final option that remains for the public stockholders of Liberty Telecoms to take is to go to court. However, who among them will initiate a legal battle against Globe Telecom and PLDT? Suing them would be like pitting David against two market Goliaths. Besides, this would entail lawyers’ fees.

What then could the public do? Wait for the stock exchange to delist Liberty Telecoms?

A more appreciative Securities and Exchange Commission could have helped the public against PLDT and Globe Telecom. But it should be recalled how SEC chairperson, Teresita Herbosa, even defied the Supreme Court that ordered her to penalize PLDT accordingly for violating the 60:40 percent ownership law in favor of Filipinos.

Instead of punishing PLDT for defying the provision of the Constitution on ownership of telecom companies, the SEC, led by chairperson Herbosa, allowed the Indonesian-controlled First Pacific Co. Ltd. to issue 150 million voting preferred shares to dilute foreigners’ ownership control to legally allowable level.